Take-Home Pay on Tips

Tips are part of your pay, and the taxman treats them that way. Federal tax, Social Security, Medicare and state tax all come out of tips, just like they come out of your normal wage. This tax tip calculator shows you what you actually keep from your tips — and what goes to tax.

Example filled in: $500 of tips every two weeks, on a $60,000 salary, single, in Texas — you keep $379.75 of the $500.

Your tips and pay

Tips per pay period ($) The tips you get in one pay period, in dollars ($) — before tax. Your regular gross pay per pay period ($) Your usual paycheck before tax — $2,307.69 is a $60,000 salary paid every two weeks. The calculator works out your take-home pay with and without the tips, and the difference is what the tips are worth.

Tax details

Filing status How you file your federal tax — it sets your standard deduction. State The state where you work — it sets your state tax. Pay frequency How often you get paid — it sets how many paychecks a year you get.

Deductions

401(k) contribution (% of gross pay) The share of your gross pay that goes to your 401(k) — it applies to your tips too, so part of the tips goes into your 401(k). Health premium per pay period ($) What you pay for health cover each paycheck, in dollars ($).

How to use this calculator

Enter your tips and your regular gross pay for one pay period.
Pick your filing status, state, and pay frequency, and your 401(k) and health deductions.
Tap "Work out my tips" — this tip calculator updates as you change any number, and shows what you keep from your tips and what goes to tax.

How tips are taxed

Tips are wages. Federal income tax, Social Security (6.2%) and Medicare (1.45%) come out of them, and state tax too, at the same rates as your normal pay. Your employer is supposed to hold the tax back from your paycheck, and you report all of your tips on your tax return — cash tips included.

Here is how this calculator works it out. It runs the Paycheck Calculator twice: once on your regular pay alone, and once on your regular pay plus your tips. The difference between the two take-home figures is what your tips are worth in your bank. The tax on the tips is the difference in federal tax, FICA and state tax between the two runs. Because your 401(k) percentage applies to your whole gross pay, part of the tips goes into your 401(k) as well — that shows up on its own line, so you can see it.

2026: tips and the tax return

Under the 2026 tax law (the One Big Beautiful Bill Act), up to $25,000 of qualified tips a year may be deductible on your tax return, for tax years 2025 to 2028. The deduction phases out at higher incomes — above $150,000 of modified adjusted gross income if you file single, $300,000 if you file jointly. It is a deduction you claim when you file, so the saving shows up at tax time, not in your paycheck. This calculator shows your paycheck as your employer pays it. Tips still count for Social Security and Medicare — the deduction does not change FICA.

Worked example — $500 of tips in Texas

$500 of tips every two weeks, on top of a $60,000 salary, single, in Texas, with 5% going to a 401(k) and $120 a paycheck for health cover:

Take-home pay without the tips: $1,740.12 a paycheck. Take-home pay with the tips: $2,119.87 a paycheck. So the $500 of tips is worth $379.75 in your bank.

What came out of the $500: federal tax $57.00, Social Security $31.00, Medicare $7.25, Texas state tax $0.00, and an extra $25.00 into the 401(k) (5% of the $500). That adds up to $120.25, which is exactly the $500 minus the $379.75.

Over a year, the tips add up to $13,000, and you keep $9,840.48 of it.

Frequently asked questions

Do I have to pay tax on cash tips?

Yes. All tips are wages, cash tips included, and you are supposed to report them all. Your employer holds back tax where it can; if not enough is held back from your paychecks, you may owe the rest when you file your return.

Why do I keep only $379.75 of my $500 in tips?

Because the tax comes out first. In the Texas example, federal tax takes $57.00, Social Security and Medicare take $38.25, and $25.00 more goes into the 401(k), because the 401(k) percentage applies to your whole pay, tips included. Add those up and you get $120.25 — that is what came out of the $500.

Does the 2026 no-tax-on-tips rule mean my tips are tax-free?

No. Up to $25,000 of qualified tips a year may be deductible on your tax return, for tax years 2025 to 2028, and the deduction phases out at higher incomes. It lowers your taxable income when you file — your employer still holds tax back from your paycheck, and Social Security and Medicare still apply. The calculator shows the paycheck as it is paid.

How much tax is taken out of tips?

In the Texas example on this page, $120.25 comes out of $500 of tips every two weeks — $57.00 federal tax, $31.00 Social Security, $7.25 Medicare, and $25.00 more into the 401(k). That leaves $379.75 in your bank. Put in your own tips, salary and state above to see your number.

Sources and 2026 figures. IRS Publication 15-T; IRS Rev. Proc. 2025-32; One Big Beautiful Bill Act, Pub. L. 119-21 (tips deduction, 2025–2028). Standard deduction 2026: $16,100 single / $32,200 married filing jointly. Social Security wage base 2026: $184,500. Social Security 6.2%, Medicare 1.45% (+0.9% over $200,000). Results are estimates, not tax advice.

Estimate, not tax advice. This calculator uses simplified 2026 tables for illustration. Verify your withholding with IRS Publication 15-T and a tax professional.